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Capitalize, a startup that wants to make it easy to roll over your 401(k), closes on $12.5M Series A

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If you’ve ever left a job, chances are you left your 401(k) plan along with it.

And, if you’re like many Americans and change jobs every few years or so, you could have multiple 401(k) plans spread out at various companies, doing their own thing.

Many of us don’t deal with the hassle of trying to consolidate accounts, which can lead to lost money over many years.

Enter Capitalize. The New York-based startup aims to address this very problem with a platform that it claims makes it virtually painless to locate misplaced 401(k) accounts, select and open individual retirement accounts (IRAs) and consolidate retirement plans — for free. 

And it’s just raised $12.5 million in a Series A round to help grow that platform. Canapi Ventures led the round, with participation from existing backers including Bling Capital, Greycroft, RRE  Ventures and Walkabout Ventures. 

Australian-born Gaurav Sharma co-founded the company after years of working in traditional finance.

“While I enjoyed investing, I started peeling back the layers and saw a host of systemwide problems with the 401(k) market,” he recalls. “One of those being that our accounts are tied to our employers.”

Sharma said that about one-third of the people who change jobs end up cashing out their 401(k) plans, and paying the related penalties.

“Another several million leave it behind for an extended period of time, ultimately because it’s complicated to move the money,” he said.

Sharma teamed up with CTO Chris Phillips in late 2019 to form Capitalize, which went on to raise a $2 million seed round last March led by Bling Capital. Since its formal launch last September, the rollover platform has processed almost $10 million in volume.  

“There were a lot of layoffs during the summer last year as a result of the pandemic,” Sharma said. “So a lot of our early users while we were in beta were people who had been impacted by those layoffs.”

I was curious about how Capitalize’s offering differs from the services that financial advisors provide. According to Sharma, the difference lies in the process and eligibility requirements.

“If you have an advisor, they will help you do some of this but in a really manual way, whereas we have built an online platform to help consumers find and consolidate retirement accounts,” Sharma told TechCrunch. “And usually, you have to have a few hundred thousand in assets to even get an advisor.”

That was one of the things that motivated Sharma.

“Whether you have $500 or $500,000 in assets, we’ll help you,” he said.

As mentioned above, Capitalize’s service is free to consumers, who can go to the site and let the company manage the consolidation process for them. If they need to open an IRA, the platform can help them do that, too.

“We help them compare IRAs from leading fintech providers and established institutions,” Sharma explained. If Capitalize has forged a commercial relationship with one of those providers, it is compensated by them for the referral in a model that is similar to NerdWallet, PolicyGenius and Credit Karma.

And if they already have an IRA, Capitalize will still help with consolidation.

Capitalize also offers employers a free offboarding service to help departing employees “roll over quickly at the point of job change,” Sharma said. 

“This is also great for the employer, who can save money on administrative fees and reduce fiduciary risk,” he added.  

Canapi Ventures partner Jeffrey Reitman said his fintech venture fund, which has about 43 banks as LPs, was attracted to a number of things about Capitalize’s team and platform. 

First off, he described Sharma as “one of the best early-stage CEOs” he’s seen when it comes to recruiting, company building and decision making.

Canapi also had one of its VPs and family members try out the product in its early beta format.

They said, according to Reitman, that the platform “worked like magic and removed so much friction in the process.”

“So when you have a team member that has such a strong reaction to it, that’s such a validator of what it can be at scale,” he told TechCrunch. “That made it a bit of a no-brainer for us.”

Besides also being drawn to the company’s “mission-driven” approach, Reitman noted that about 80% of its existing bank LP base has existing IRA and individual retirement account products.

“Many of them are digital in nature, we believe there should be a lot of synergies between what banks are trying to accomplish as they further digitize their product suite and what Capitalize is looking to accomplish in reducing friction for as many people as possible in that process.”

Looking ahead, Capitalize plans to use its new capital to refine and streamline its product, and continue to invest in technology.

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Snowflake latest enterprise company to feel Wall Street’s wrath after good quarter

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Snowflake reported earnings this week, and the results look strong with revenue more than doubling year-over-year.

However, while the company’s fourth quarter revenue rose 117% to $190.5 million, it apparently wasn’t good enough for investors, who have sent the company’s stock tumbling since it reported Wednesday after the bell.

It was similar to the reaction that Salesforce received from Wall Street last week after it announced a positive earnings report. Snowflake’s stock closed down around 4% today, a recovery compared to its midday lows when it was off nearly 12%.

Why the declines? Wall Street’s reaction to earnings can lean more on what a company will do next more than its most recent results. But Snowflake’s guidance for its current quarter appeared strong as well, with a predicted $195 million to $200 million in revenue, numbers in line with analysts’ expectations.

Sounds good, right? Apparently being in line with analyst expectations isn’t good enough for investors for certain companies. You see, it didn’t exceed the stated expectations, so the results must be bad. I am not sure how meeting expectations is as good as a miss, but there you are.

It’s worth noting of course that tech stocks have taken a beating so far in 2021. And as my colleague Alex Wilhelm reported this morning, that trend only got worse this week. Consider that the tech-heavy Nasdaq is down 11.4% from its 52-week high, so perhaps investors are flogging everyone and Snowflake is merely caught up in the punishment.

Snowflake CEO Frank Slootman pointed out in the earnings call this week that Snowflake is well positioned, something proven by the fact that his company has removed the data limitations of on-prem infrastructure. The beauty of the cloud is limitless resources, and that forces the company to help customers manage consumption instead of usage, an evolution that works in Snowflake’s favor.

“The big change in paradigm is that historically in on-premise data centers, people have to manage capacity. And now they don’t manage capacity anymore, but they need to manage consumption. And that’s a new thing for — not for everybody but for most people — and people that are in the public cloud. I have gotten used to the notion of consumption obviously because it applies equally to the infrastructure clouds,” Slootman said in the earnings call.

Snowflake has to manage expectations, something that translated into a dozen customers paying $5 million or more per month to Snowflake. That’s a nice chunk of change by any measure. It’s also clear that while there is a clear tilt toward the cloud, the amount of data that has been moved there is still a small percentage of overall enterprise workloads, meaning there is lots of growth opportunity for Snowflake.

What’s more, Snowflake executives pointed out that there is a significant ramp up time for customers as they shift data into the Snowflake data lake, but before they push the consumption button. That means that as long as customers continue to move data onto Snowflake’s platform, they will pay more over time, even if it will take time for new clients to get started.

So why is Snowflake’s quarterly percentage growth not expanding? Well, as a company gets to the size of Snowflake, it gets harder to maintain those gaudy percentage growth numbers as the law of large numbers begins to kick in.

I’m not here to tell Wall Street investors how to do their job, anymore than I would expect them to tell me how to do mine. But when you look at the company’s overall financial picture, the amount of untapped cloud potential and the nature of Snowflake’s approach to billing, it’s hard not to be positive about this company’s outlook, regardless of the reaction of investors in the short term.

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A first look at Coursera’s S-1 filing

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After TechCrunch broke the news yesterday that Coursera was planning to file its S-1 today, the edtech company officially dropped the document Friday evening.

Coursera was last valued at $2.4 billion by the private markets, when it most recently raised a Series F round in October 2020 that was worth $130 million.

Coursera’s S-1 filing offers a glimpse into the finances of how an edtech company, accelerated by the pandemic, performed over the past year. It paints a picture of growth, albeit one that came at steep expense.

Revenue

In 2020, Coursera saw $293.5 million in revenue. That’s a roughly 59% increase from the year prior when the company recorded $184.4 million in top line. During that same period, Coursera posted a net loss of nearly $67 million, up 46% from the previous year’s $46.7 million net deficit.

Notably the company had roughly the same noncash, share-based compensation expenses in both years. Even if we allow the company to judge its profitability on an adjusted EBITDA basis, Coursera’s losses still rose from 2019 to 2020, expanding from $26.9 million to $39.8 million.

To understand the difference between net losses and adjusted losses it’s worth unpacking the EBITDA acronym. Standing for “earnings before interest, taxes, depreciation and amortization,” EBITDA strips out some nonoperating costs to give investors a possible better picture of the continuing health of a business, without getting caught up in accounting nuance. Adjusted EBITDA takes the concept one step further, also removing the noncash cost of share-based compensation, and in an even more cheeky move, in this case also deducts “payroll tax expense related to stock-based activities” as well.

For our purposes, even when we grade Coursera’s profitability on a very polite curve it still winds up generating stiff losses. Indeed, the company’s adjusted EBITDA as a percentage of revenue — a way of determining profitability in contrast to revenue — barely improved from a 2019 result of -15% to -14% in 2020.

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The owner of Anki’s assets plans to relaunch Cozmo and Vector this year

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Good robots don’t die — they just have their assets sold off to the highest bidder. Digital Dream Labs was there to sweep up IP in the wake of Anki’s premature implosion, back in 2019. The Pittsburgh-based edtech company had initially planned to relaunch Vector and Cozmo at some point in 2020, launching a Kickstarter campaign in March of last year.

The company eventually raised $1.8 million on the crowdfunding site, and today announced plans to deliver on the overdue relaunch, courtesy of a new distributor.

“There is a tremendous demand for these robots,” CEO Jacob Hanchar said in a release. “This partnership will complement the work our teams are already doing to relaunch these products and will ensure that Cozmo and Vector are on shelves for the holidays.”

I don’t doubt that a lot of folks are looking to get their hands on the robots. Cozmo, in particular, was well-received, and sold reasonably well — but ultimately (and in spite of a lot of funding), the company couldn’t avoid the fate that’s befallen many a robotics startup.

It will be fascinating to see how these machines look when they’re reintroduced. Anki invested tremendous resources into bringing them to life, including the hiring of ex-Pixar and DreamWorks staff to make the robots more lifelike. A lot of thought went into giving the robots a distinct personality, whereas, for instance, Vector’s new owners are making the robot open-source. Cozmo, meanwhile, will have programmable functionality through the company’s app.

It could certainly be an interesting play for the STEM market that companies like Sphero are approaching. It has become a fairly crowded space, but at least Anki’s new owners are building on top of a solid foundation, with the fascinating and emotionally complex toy robots their predecessors created.

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